Guotai Junan: Trade-in and superimposing Double Eleven promotions have obvious stimulating effects, and Q4 appliances are expected to reach an inflection point

The Zhitong Finance App learned that Guotai Junan released a research report saying that according to data from the Ministry of Commerce, in early November, retail entrepreneurs focused on monitoring a 45% year-on-year increase in sales; as of November 11, 21.608 million consumers had purchased 32.719 million units of 8 categories of household appliances. In terms of channels, offline growth is higher than online, and is highly sustainable. Due to differences in how different provinces participate in subsidy activities, the overall focus is more on offline channel support, and since offline channels do not participate in the Double 11 subsidy, the growth trend is accelerating month-on-month and is more sustainable. Since W43-W46 already had a big Double 11 promotion during the same period, the online growth rate narrowed during the Double 11 period.

The sales structure of ice washing and color TV has improved to a greater extent

Driven by a large proportion of the subsidy policy, the consumption structure of most household appliances showed an upward trend. Guotai Junan pointed out that by comparing the average sales price of each category during the subsidy period with the cumulative average annual price before the subsidy, the absolute price of online channels increased across the board. Furthermore, under the guidance of subsidies on high energy efficiency standards, the average price increase of categories such as color TV, which originally had a high share of low energy efficiency, was most obvious (the impact of changes in panel prices is not involved here).

Air conditioner production and sales data were released in October, and domestic and foreign sales maintained a high year-on-year growth rate. According to industry online monitoring data, in October 2024, household air conditioners were produced at 14.057 million units, +48.0% year-on-year; sales were 12.869 million units, or +37.9% year-on-year. Among them, domestic sales shipped 6.289,000 units, +24.1% year-on-year, and 6.58 million units were exported, or +54.3% year-on-year.

In 2024, the majority of household appliance subsidy funds will be used, and the vast second-tier and sinking markets will support replacement demand

Guotai Jun An said that in combination with estimates of the total size of subsidies related to home appliances, recent public information disclosure and recent research results on channels such as Hubei, Wuhan, Chengdu, and Qingdao, it is estimated that some 80% of the national home appliance trade-in capital pool will have been used by mid-November 2024. According to tracking the growth rate of each province by category, it was found that demand for new replacement/new purchases in first-tier cities such as Beijing and Shanghai is more reflected in emerging household appliances with low penetration rates, and growth in traditional categories is relatively weak. Strong growth rates have erupted in the central and western regions, on the one hand, indicating that the real large demand for stock replacement lies in the second and third tier and sinking markets.

Recommended targets: White electricity is the most stable and most directly benefiting from policy incentives. Midea Group (000333.SZ) (2024PE: 13.7x) and Haier Smart Home (600690.SH) (14.2x) are recommended; the black electric sector also benefits from trade-in, and TCL Electronics (01070) (9.6x) and Hisense Vision (600060.SH) (13.9x) are recommended. The real estate policy continues to send positive signals. There are opportunities for kitchen appliances with stronger attributes in the post-cycle period to make up the increase. We recommend Boss Electric (002508.SZ) (13.0x) and Vantage (002035.SZ) (12.8x).

Risk warning: The impact of the trade-in policy on the future is less than expected, the risk of insufficient demand in the post-cycle due to a continued decline in real estate sales and completion, and the risk of fluctuating raw material prices.